DAYS INNS WORLDWIDE, INC. v. JPM, INC. et al

Filing 15

OPINION. Signed by Judge Kevin McNulty on 9/15/2015. (anr)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
DAYS INNS WORLDWIDE, INC., a
Delaware Corporation,

Civ. No. 13-3017 (KM)

Plaintiff,

OPINION

V.

JPM, INC., a Georgia Corporation,
and JAYANTILAL SHAH, an
individual,
Defendants.

MCNULTY, U.S.D.J.:
This matter comes before the Court on the unopposed motion of the
plaintiff, Days Inns Worldwide, Inc. (“DIW”), for relief from portions of this
Court’s order entering final judgment by default against the defendants, JPM,
Inc. (“JPM”) and Jayantilal Shah.’ (Dkt. No. 14) As set forth in more detail
below, the order awarded DIW damages for unpaid recurring fees, attorneys’
fees, and costs, but denied liquidated damages. (Dkt. No. 13) Plaintiff now
requests that the Court amend the order to include liquidated damages,
pursuant to FED. R. Civ. P. 60(a). For the reasons set forth below, I will deny the
motion.
I. BACKGROUND
The facts underlying the default judgment were set forth in the Court’s
prior opinion and need not be repeated in full here. (See Dkt. No. 12,
pp. 1-3.)
Pursuant to a notice of dismissal, two additional defendants, Gulabbhai

P. Maisuria and Manu D. Patel, were terminated as parties on December 30,
2013. (Dkt. No. 7) The matter was dismissed as to these defendants with

prejudice.

1

For current purposes, relevant facts alleged in the Complaint can be briefly
summarized.
On October 3, 1997, DIW entered into a License Agreement with Shah for
the operation of a forty-room guest lodge facility in Rincon, Georgia. (Dkt. No.
1, ¶10; Exhibit A (“License Agreement”)) Pursuant to the agreement, Shah was
obligated to operate a Days Inn guest lodging facility for twenty-two years and
to make certain periodic payments to DIW for royalties, service assessments,
taxes, interest, reservation system user fees, and other fees (collectively
referred to herein as “recurring fees”). (Dkt. No. 1, ¶J 12, 13) JPM also agreed
to pay interest on delinquent payments. (Dkt. No. 1,

¶

14)

On May 4, 2000, Shah, DIW, and JPM entered into an Assignment and
Assumption Agreement (“Assignment Agreement”) whereby JPM assumed all of
Shah’s rights and obligations under the License Agreement. (Dkt. No. 1, ¶ 11;
Exhibit B (“Assignment Agreement”)) Shah provided DIW with a guaranty of
JPM’s obligations under the License Agreement upon the effectuation of the
Assumption Agreement. (Dkt. No. 1, ¶ 20; Exhibit C (“Guaranty”))
Under the terms of the License Agreement, DIW could terminate the
agreement for various defaults. (Dkt. No. 1, ¶ 17) In the event of termination,
JPM agreed to pay liquidated damages to DIW in accordance with a formula set
for in the License Agreement. (Dkt. No. 1, ¶ 18) The License Agreement also
provided that the non-prevailing party would be required to pay attorneys’ fees
and costs incurred by the prevailing party to enforce the License Agreement or
to collect amounts owed. (Dkt. No. 1,

¶

19)

Beginning in November 2011, DIW informed JPM by multiple letters that
it owed DIW recurring fees and was in violation of their agreement. (Dkt. No. 1,
23-24) By letter dated March 28, 2012, DIW exercised its right to terminate

¶11

the License Agreement because of JPM’s continued default. (Dkt. No. 1,
DIW’s Complaint, filed on May 10, 2013 (Dkt. No. 1), sought (1)

¶

25)

liquidated damages in the amount of $80,000 (plus prejudgment interest),
pursuant to § 12.1 of the License Agreement; (2) recurring fees in the amount
2

of $1 37,286,2 pursuant to

§ 7 and Schedule C of the License Agreement; and
(3) attorneys’ fees and costs in the amount of $9,227.96, pursuant to § 17.4 of

the License Agreement. Defendants failed to answer or otherwise respond to
the Complaint. On DIW’s request, the Clerk of Court entered default judgment
against defendants on July 26, 2013.
On April 21, 2014, DIW filed a motion for default judgment against JPM
and Shah. (Dkt. No. 11) This Court entered default judgment on August 4,
2014. (Dkt. No 13) The Court awarded plaintiff $146,513.96, consisting of
$137,286 in recurring fees and $9,227.96 in attorneys’ fees and costs, along
with post-judgment interest at the appropriate rate pursuant to 28 U.S.C.

§ 1961. (Dkt. No. 13) The Court found that the recurring fees and attorneys’
fees and costs were sufficiently documented and that that the attorneys’ fees
and costs did not appear to be unreasonable or disproportionate. (See Dkt. No.
12, p. 7)
I exercised my discretion to deny DIW’s request for liquidated damages in
the amount of $80,000 principal, plus $43,986.75 interest, finding that DIW
had not adequately explained its liquidated damages calculation or
demonstrated the provision’s reasonableness, as required by New Jersey law.
See MetLife Capital Financial Corp. v. Washing Ave. Associates L.P., 159 N.J.
484, 493, 732 A.2d 493 (1999); see also N.J.S.A. 12A:2-718. In addition, DIW’s
liquidated damages request, on its face, appeared to contain at least one error
as to the applicable date.
On November 17, 2014—more than three months after the entry of
judgment—DIW filed the present motion. (Dkt. No. 14) In its papers, DIW offers
an explanation for the formula it relied upon to calculate liquidated damages,
as well as a revised calculation of prejudgment interest. Explaining that in its
initial papers, it used the wrong date to calculate prejudgment interest on the
liquidated damages (April 30, 2011 instead of April 27, 2012), DIW reduces its

This amount is inclusive of interest, calculated at the legal rate of 1.5%
per month, pursuant to Section 7.3 of the License Agreement.

2

3

liquidated damages request (inclusive of prejudgment interest) from
$123,986.75 to $109,660.40. (Dkt. No. 14, pp. 13-14) DIW asserts that the
Court’s August 4, 2014 order should be amended because the flaws in its
liquidated damages request constitute a “clerical error” (on the part of DIW)
that warrants correction under FED. R. Civ. P. 60(a). I disagree, and will deny
the motion.
II. DISCUSSION

a. L. Civ. R. 7.1(i),

FED.

R. Civ. P. 59(e)

Plaintiff DIW’s motion, directed to the Court’s August 4, 2014 order and
judgment, is most naturally seen as one under L. CIV. R. 7.1(i), “Motions for
Reconsideration,” or FED. R. Civ. P. 59(e), “Motion to Alter or Amend a
Judgment.” Indeed, the plaintiff’s papers sometimes appear to describe it as
such. (See Dkt. No. 14, p. 4) (“DIW now moves the court to reconsider its prior
ruling based upon the additional explanation submitted herewith, including
DIW’s method for calculating liquidated damages.”).
L. Civ. R. 7.1(i) requires that a motion for reconsideration be filed within
14 days after the entry of the order or judgment. FED. R. Civ. P. 59(e) requires
that a motion to alter or amend a judgment must be filed “no later than 28
days after the entry of the judgment.” Here, judgment was entered on August 4,
2014, and DIW’s motion was filed on November 17, 2014, more than three
months later. Under either of these Rules, then, this motion would be
3
untimely.
DIW’s delay in filing the motion is unexplained. The August 4, 2014
opinion clearly stated the deficiencies I perceived with the plaintiff’s liquidated
damages claim. A timely motion for reconsideration under Local Rule 7.1 or

Nor has DIW filed a notice of appeal—and an untimely motion does not extend
the time to appeal under Fed. R. App. P. 4(a)(4)(A). A Rule 60 motion extends the time
to appeal by 28 days, at most. Id.
4

Rule 59(e) might have afforded the Court more latitude to change its ruling in
light of information that had not been before it. But because such a motion is
out of time, the plaintiff is relegated to Rule 60(a), which has no time limit, but
imposes a far stricter substantive standard.
b. FED. R. Civ. P. 60(a)
In light of the time limits discussed above, the plaintiff has instead
invoked FED. R. Civ. P. 60(a), which has no time limit. See FED. R. Civ. P. 60(a)
(court may correct a “clerical mistake

...

whenever one is found”). Rule 60(a),

however, is not simply an avenue for circumventing the time limits of Rule
59(e). See, e.g., Thompson v. Toyota Motor Coip., 157 F.R.D. 10, 12 (D.N.J.
1994) (noting that “a litigant may not avoid the time limitation imposed by Rule
59(e) by filing his motion pursuant to [an inapplicable rule],” in that case, Rule
60(b))(internal quotations and citations omitted). Rule 60(a) and its liberal
approach to timeliness, however, are strictly confined to the correction of
clerical or scrivening errors. Stradley v. Cortez, 518 F.2d 488, 493 (3d Cir.
1975) (unless a mistake is truly clerical in nature, plaintiff “cannot take
advantage of the liberal time provision of Rule 60(a)”)

.

Rule 60(a), then, allows the court to correct a “clerical mistake or a
mistake arising from oversight or omissions whenever one is found in a
judgment, order, or other part of the record.” The Third Circuit has explained
that the rule is “limited to the correction of ‘clerical mistakes’; it encompasses
only errors ‘mechanical in nature, apparent on the record, and not involving an
error of substantive judgment.” Pfizer Inc. v. Uprichard, 422 F.3d 124, 129-30
(3d Cir. 2005)(quoting Mack Trucks, Inc. v. Int’l. Union, UAW, 856 F.2d 579, 594
n. 16 (3d Cir. 1988)). The rule was adopted to make clear that courts can
“correct judgments which contain clerical errors, or judgments which have
been issued due to inadvertence or mistake.” In re FleetBoston Fin. Corp. Sec.
When Thompson and Stradley were decided, Rule 59(e) had a 10 day filing
deadline. The principle remains the same.

4

5

Litig., No. 02-cv-4561, 2007 WL 4225832, at *4 (D.N.J. Nov. 28, 2007) (quoting
American Trucking Ass’ns v. Frisco Transp. Co., 358 U.s. 133, 145 (1958)).

To ensure finality, correction of allegedly substantive errors is subject to
the relatively short time limits to move for amendment or reconsideration, or to
file an appeal. Mistakes that are merely clerical, however, can be corrected
without reopening the substantive merits. For that reason, a Rule 60(a) motion
to correct such a mistake may be filed at any time.
In general, Rule 60(a) applies to the Court’s own mistakes, but it has
been stretched slightly. Because the Rule is “used to make an order reflect the
actual intentions of the court, plus necessary implications,” a court may use it
to correct clerical errors made by a party when necessary to make a written
order accurately reflect the court’s decision. In re FleetBoston, 2007 WL
4225832, at *4 (internal quotations and citations omitted); see U.S. v. Stuart,
392 F.2d 60, 62 (3d Cir. 1968) (pursuant to Rule 60(a), allowing the
government to supplement the record with a document that supported the
judgment and was “inadvertently omitted” at the time of judgment). No such
circumstances are present here.
It is possible to argue with this Court’s substantive decision, and the
plaintiff does. But such arguments have no place in a Rule 60(a) motion. There
was no scrivening error that resulted in the Court’s order failing to reflect its
actual decision. The order accurately reflected the Court’s decision, which
granted recurring fees, attorneys’ fees, and costs, but denied liquidated
damages. That was the Court’s intent, and that is what the order did.
What DIW seeks to correct here are errors or omissions in its own papers
which, if remedied, might have led the Court to make a different decision. (See
Dkt. No. 14, p. 8) (requesting that the Court correct “DIW’s oversight in
presenting its claimed liquidated damages, along with the typographical error
in the prejudgment interest calculation...”). That is quintessentially a matter for
6

reconsideration under Local Rule 7.1 or Rule 59(e), not for correction of a
clerical error under Rule 60(a).
Here, from the August 4, 2014 opinion, are the Court’s several reasons
for denying DIW’s liquidated damages claim:
DIW here asserts an awkward combination of actual and liquidated
damages. It does not adequately explain the extent to which they
might overlap. Nor does DIW proffer a basis for the Court to
conclude that the liquidated damages provision is a reasonable
estimate of difficult-to-calculate actual damages. The liquidated
damages provision does suggest a formula, based on recurring fees
for the preceding 24 months, but it also provides that “Liquidated
Damages shall not be less than the product of $2,000 multiplied
by the number of guest rooms in the Facility.” Agreement § 12.1.
DIW has not calculated that formula, but rests on the $2,000 per
room minimum amount—which comes out to $80,000, plus
$43,986.75 interest. The relation between that minimum amount
and a reasonable estimate of actual damages is not explained. At
any rate, DIW does not apportion its damages in detail. Nor does it
explain how liquidated “future” damages (“future” as of 2011, that
is) relate to the actual history of the property since then. Nor does
DIW explain how these liquidated damages might interact with its
duty to mitigate after terminating the contract.
(Dkt. No. 12, pp. 6-7) These are all substantive reasons—mistaken ones, says
DIW, but nevertheless substantive, not clerical.
DIW hangs much of its argument on the Court’s footnoted observation
that, in calculating prejudgment interest (not liquidated damages per Se), DIW
might have accidentally written 2011 when it intended 2012:
I note, for example, that the Liquidated Damages are claimed as
“future” damages as of the date of the “termination” on April 30,
2011. Fenimore Aff. ¶ 26. As of March 15, 2012, however, the
correspondence is still referring to a “default” (not a termination),
offering the opportunity to cure, and calculating actual, accrued
damages (not future or estimated damages), as of that date, in the
amount of $130,712.71. Fenimore Aff. Ex. E. On this motion, DIW
is claiming that entire amount in addition to the “future” liquidated
damages. And interest on the entire $80,000 is calculated on an
accelerated basis from April 30, 2011. (Perhaps 2012 was
7

intended.) When a default is claimed, a party is expected to
exercise particular care and to explain its calculations in sufficient
detail, because no adversary is present to probe their accuracy. I
am not satisfied that threshold has been met.
(Dkt. No. 12, pp. 6—7 n.4)
Such a calculation-related error—plaintiff’s, not the Court’s—does not
transform DIW’s entire presentation of its liquidated damages claim into a
“clerical error” that may be “corrected.” First, of course, this error was caught
by the Court, brought to DIW’s attention, and taken into account in the Court’s
discussion. Second, it is but one small facet of the Court’s disagreement with
the liquidated damages presentation. Third, it relates primarily to interest and
bears indirectly upon the underlying denial of liquidated damages.
The Court found DIW’s presentation as to liquidated damages to be
substantively inadequate. Believing that there is potential for overreaching in
the calculation of damages by hotel chains pursuant to their very stringent
agreements with defaulting franchisees, I held plaintiff to an appropriate
standard of legal and factual accuracy. That, assuming arguendo that it was a
mistake, is not the kind of clerical mistake that can be corrected without
reopening the merits. Rule 60(a) was not intended to reach claims of this kind.
III. CONCLUSION

For the foregoing reasons, the motion of plaintiff DIW is denied. A written
order will be entered separately.

KEVIN MCNULTY
United States District Ju

Dated: September 15, 2015

8